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Eletrobras ADRs Drop to Eight-Year Low on Compensation

Centrais Eletricas Brasileiras SA, South America’s largest power producer, plunged to an eight-year low in New York after Brazil’s government proposed less compensation for rate cuts than the company expected.

American depositary receipts of Eletrobras, as Centrais Eletricas is known, tumbled 9 percent to $5.16 at the close of trading, the lowest since July 2004. Trading surged to 186 percent of the average volume in the past three months, according to data compiled by Bloomberg. Brazilian markets were closed for a holiday.

Brazil’s government proposed compensating utilities a total of about 19 billion reais ($9.4 billion) for next year’s early renewal of generation and transmission contracts that had been set to expire between 2015 and 2017, according to the official gazette. New concession rules will lower revenue and the power rates charged as part of a package announced by President Dilma Rousseff in September that aims to cut electricity costs by as much as 28 percent.

Eletrobras will receive 14 billion reais if it agrees to renew its concession under the new rules. Jose da Costa Carvalho Neto, president of the state-controlled utility, said this week that he expected the company to receive “close to” 30 billion reais in compensation.

ADRs of Cia Energetica de Minas Gerais, or Cemig, fell 2.7 percent to $11.87. The company may receive 285.4 million reais, and is among the utilities with the most assets renewing concessions under the new terms.

Cia Paranaense de Energia, known as Copel, would receive 893.9 million reais under the government’s proposal. Its ADRs fell 0.8 percent to $14.83.

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